BANKING
Sharma admits poor progress on loan scheme
Business Secretary Alok Sharma says he had been in touch with leading banks to emphasise the need for emergency loans to be distributed to businesses quickly. Three weeks after the coronavirus business interruption loan scheme (CBILS) was launched just 4,200 of the estimated 300,000 firms that sought help online have received rescue loans. The Treasury is also under pressure to underwrite 100% of the loans, as Germany and Switzerland have done, removing the risk of default from banks and speeding up the process. Meanwhile, the Sunday Times reports that RBS has approved 70% of the loans handed out to businesses under the CBILS, granting 2,500.
Challenger banks approved to give emergency loans
The Co-operative Bank, Cynergy Bank, Oak North and Starling have been added to the Government's emergency coronavirus lending scheme. The British Business Bank’s CEO Keith Morgan said the quartet would help meet the "incredible demand" from small businesses. Non-bank lenders, including Funding Circle, Iwoca and Market Finance, hope to be approved to join the programme this week. Meanwhile, fintech firms insist they could get loans out to small businesses faster than high street banks, which they say use crumbling legacy systems. Charlotte Crosswell, of Innovate Finance, says: "There's a lot of back and forth with us and the Government and regulators on how we can really leverage the fintech sector now.”
Santander’s UK chief takes pay cut
Nathan Bostock, the CEO of Santander UK, has announced a cut to his salary. He will make a donation of £1m to a coronavirus fund launched by the bank's Spanish parent firm. Santander UK and Barclays have yet to make a statement on bonuses for bosses in 2020 while HSBC, Lloyds and RBS have all said executives will not be receiving one this year. Elsewhere, Virgin Money has announced that 13 senior bankers will forgo cash bonuses for 2020.
Treasury extends overdraft for lockdown
The Bank of England has extended the Treasury’s overdraft facility as a temporary measure during the disruption caused by COVID-19. James Smith, an economist at ING, said: “Assuming the overdraft proves to be a temporary stopgap as it was in 2008/2009, it should help money-market functioning.”
Banks break promise on fraud repayments
The Payment Services Regulator has revealed that two banks that had signed up to the pledge to reimburse customers tricked into transferring money to fraudsters have refused to pay out in 96% of cases. The watchdog would not identify the banks but said that it was pushing for improvement. Gareth Shaw from the consumer group Which? said: “Banks that reimburse 4% of cases are making a mockery of the scams code.”
Banks will ensure free-to-access cash machines
ATM network operators have struck a deal with banks to ensure free-to-use cash machines are opened on any British high street or remote area that loses access to cash in the coming year. James Daley, head of consumer group Fairer Finance, said: "We're not yet ready as a society to go cashless as vulnerable groups rely on it." Since the coronavirus lockdown, 850 free cashpoints in remote areas have closed.
Credit lines at record high
Berenberg data shows that businesses are drawing down credit lines at a record pace amid the COVID-19 outbreak, with almost half of revolving credit facilities currently being used compared to a utilisation rate of 8% in December. Berenberg bank analyst Andrew Lowe said: “Corporates are in survival mode … In order to improve liquidity, many have already drawn down on their lending facilities with banks.”
Rates on instant-access accounts collapse
Lloyds, Halifax, Barclays, Santander, TSB, and NatWest are set to reduce the savings rates on instant-access accounts to 0.01% following the Bank of England’s move to reduce the base rate to 0.1%. Better deals can be had on notice accounts, with Investec offering the best deal, paying 1.6% on its 95-day account.
Gadhia backs finance sector’s coronavirus response
The former boss of Virgin Money, Jayne-Anne Gadhia, has backed the financial services sector’s response to the coronavirus crisis and says big banks will behave better than during the financial crisis back in 2008. Ms Gadhia was speaking as she launched her fintech app Snoop - which uses AI and open banking data to help consumers save money on bills and day-to-day spending.
PRIVATE EQUITY
BlackRock wins contract to advise EU on environmental rules for banks
BlackRock‘s Financial Markets Advisory arm has won a contract to perform an analysis on how the EU could best integrate ESG factors into its banking supervision. However, climate and energy campaigners say there is a clear conflict of interest, with BlackRock controlling large stakes in many of the world’s biggest fossil fuel companies.
Buyout firms push for access to UK emergency loan scheme
The Government is being lobbied by private equity firms for access to the state-backed emergency loans package, with venture capitalists worried their companies will be viewed in aggregate, making them ineligible. Meanwhile, officials fear providing funds to PE groups would be bad optics and could break EU state aid rules.
Index Ventures looks to post COVID-19 emergents
Index Ventures has raised $2bn to invest in the "next generation of entrepreneurs" that it expects to emerge from the economic crisis caused by the COVID-19 pandemic. The venture capital firm said: "We are witnessing the emergence of a new generation of exceptional leaders."
INTERNATIONAL
A long lockdown could spell years of pain for banks
The Economist considers the health of global banks as they entered the coronavirus crisis and posits that anything more than a short lockdown in the West could mean years of losses on soured loans. "The tail event is no vaccine in a year," says Sir Paul Tucker, chair of the Systemic Risk Council. “Banks need to be stressed against such scenarios, as post-crisis capital requirements were not calibrated against anything like that.”
Debt bomb fears with $20trn needing refinancing this year
The Institute of International Finance (IIF) has warned that the shock to the global economy by the coronavirus outbreak risks destabilising $20trn of bonds and loans due before the end of the year. The world economy is entering a recession with $87trn more debt than at the onset of the financial crisis, the IIF said, adding that the global debt to GDP ratio now stands at 322% and is set to rise to 342% this year.
European asset managers suffer £32.9bn outflow in March
Investors pulled £32.9bn from European funds in March, according to analysis by UBS, the worst rate of outflows since the financial crisis. The withdrawals equate to 3.1% of AUM. Although outflows have continued, they slowed down substantially in the two or three weeks since mid-March.
Swiss banks agree to suspend divis
UBS and Credit Suisse have partially delayed dividend payments for 2019 after Switzerland’s financial regulator Finma urged lenders to conserve cash.
Bankers issue warning over US business support scheme
US banks have said the interest rate the Federal Reserve settles on for the lending scheme for businesses during the pandemic will influence demand for the loans, as will banks’ risk appetite.
US banks prepare to take control of oil and gas fields
JP Morgan Chase, Wells Fargo, Bank of America Corp and Citigroup are all in the process of setting up independent companies to own oil and gas assets to avoid losses on loans to energy companies that may go bankrupt.
AUTOMOTIVE
Nissan seeks £4bn in bank guarantees
Nissan is reportedly in discussions with banks including Mizuho Financial Group and the Development Bank of Japan about securing as much as £4bn in credit to ensure it is protected from future shocks.
Renault hopes €5bn in loans will see it though virus pain
Renault is seeking €5bn in loans to protect it against damage from the coronavirus pandemic. Chairman Jean-Dominique Senard said: “We are working on the idea of bank loans that would be guaranteed by the state and later reimbursed.”
AVIATION
easyJet delays Airbus order
Airbus and easyJet have come to an agreement that will see 24 of the 107 planes ordered by the airline delayed. The move comes after founder Sir Stelios Haji-Ioannou threatened to sue the airline’s executives over the purchase. Meanwhile, Airbus has cancelled plans to create a new assembly line in Toulouse for its A321 airliner. The company recently said it would cut the number of planes it builds by a third, amid expectations that global aviation will suffer from the coronavirus pandemic long after travel restrictions are eased.
CONSTRUCTION
Housebuilders spark row over taxpayer cash
Britain's biggest housing companies are facing criticism for furloughing staff despite posting large profits. Barratt, Countryside, Redrow, Bellway and Crest Nicholson are among the firms using the Government's jobs retention scheme, with Taylor Wimpey also intending to use the emergency support. The firms are facing scrutiny from the Taxpayers' Alliance. “House-builders should keep in mind that this money comes from taxpayers and they should only seek support if they need it to keep the ship afloat,” said chief executive John O'Connell.
FINANCIAL SERVICES
Financial services profits hit before crisis
The latest CBI financial services survey shows that Britain’s financial services sector suffered a drop in profits and increase in bad debts before the coronavirus crisis-prompted lockdown. The report, based on a poll of 103 firms, saw 27% report a drop in profits versus 24% which reported a rise. Some 12% of firms said they were more optimistic about overall business conditions compared to three months earlier, while 53% were negative about future prospects. Employment growth is expected to fall by 37% in the three months to June, the value of non-performing loans is expected to rise by 28% and profitability is forecast to decline by 15%.
Top City figures invited to join crisis task force
A slew of City of London grandees are to spearhead a taskforce charged with saving thousands of British businesses struck low by the coronavirus outbreak. It is understood that the Treasury called upon Sir Adrian Montague, head of the insurer Aviva, to lead the effort and he will chair a new Recapitalisation Group under the auspices of TheCityUK. Leaders in the banking, legal, audit and asset management sectors have been asked to contribute.
FCA to include motor finance in rescue measures
The Financial Conduct Authority will go ahead with measures to help consumers with their debt. These will include temporary payment freezes on loans and credit cards for up to three months, and larger zero-interest overdrafts. The move comes after talks with the Finance and Leasing Association, whose members arrange £48bn of car financing deals a year.
LEISURE & HOSPITALITY
Diageo ditches buyback and scraps forecasts
Social distancing measures and worldwide lockdowns brought on due to the coronavirus have dealt a significant blow to Diageo, the firm has said, leading it to suspend a £4.5bn share buyback and scrap forecasts for the year.
MANUFACTURING
Thermo Fisher agrees to supply UK coronavirus tests
US scientific equipment maker Thermo Fisher has said it will supply “more than 100,000 tests per day” to the UK government and would scale up its capacity to enable the kits to be manufactured in the UK.
MEDIA & ENTERTAINMENT
Telecoms firms give UK medics unlimited data and broadband upgrades
NHS frontline workers will be given unlimited data for free by Britain’s major telecoms companies to help them stay connected during the coronavirus crisis. Clinicians working from home will also qualify for an upgrade to their broadband packages.
REAL ESTATE
Lenders U-turn on mortgages
Mortgage companies have U-turned on their decision to pull riskier loans after deciding that withdrawing them would hit their balance sheets. The number of mortgage products halved from 5,239 on March 11 to 2,768 today according to Moneyfacts. But some lenders who said that they would only consider applications from people with deposits of at least 40% are now reconsidering their stance.
Trapped UK property fund investors charged £10m a month
According to estimates from the FT, retail investors trapped in UK property funds have been charged nearly £10m in fees over the past month.
ECONOMY
GDP could fall 30% in Q2
Chancellor Rishi Sunak has reportedly suggested GDP could fall by as much as 30% between April and June, while some banks have forecast a decline of around 25% in Q2 – an estimate in line with one put forward by the National Institute of Economic and Social Research think-tank last week.
UK economy already showing signs of trouble before coronavirus
Data from the ONS reveals that the UK economy was up just 0.1% in the three months before coronavirus restriction measures began to affect businesses. The ONS also found that just 40% of firms are confident their financial resources will allow them to continue operating through the coronavirus pandemic.